19 February 2019

The Weekly Note is brought to you by the ALPHA : r² discretionary service team.

Market news

European equities are lower today, with some focus on a busy earnings period, but the general trend over the past week has been positive for global markets and US-China trade developments are still dominating the narrative.

Chinese stocks have touched a six-month high on optimism that an accommodative resolution is in sight, while Beijing and Washington have confirmed that top-level negotiations will take place at the end of this week. On the other hand, EU officials have threatened to retaliate if tariffs were imposed on European car imports to the US.

The S&P 500 rode sentiment to end last week 2.6% higher, while the Euro STOXX 600 and FTSE 100 finished 3.1% and 2.6% up respectively, despite disappointing economic growth data from Germany and another dispiriting week for Prime Minister Theresa May’s Brexit plan.

In the UK, the number of people employed has reached another record high, while the unemployment rate has dropped to its lowest level since 1975, at 4%. The figures, released by the Office for National Statistics this morning, also reveal that average earnings increased by 3.4% in the year to December. Given consumer inflation hit a two-year low of 1.8% in January, it means real wage growth has also hit a multi-year high.

In politics, seven MPs quit the Labour Party yesterday to form a new outfit which they have named the Independent Group. It cited Jeremy Corbyn’s handling of anti-Semitism and Brexit as main reasons for the split, but today it has also urged Conservative MPs to join the splinter party.

America felt an unexpected rise in unemployment data last week, as well as a fall in retail sales. A stable inflation reading, however, saw US Treasury yields nudge upwards and the US Dollar Index rose by 0.5% last week, whilst sterling moved the other way amid Brexit headwinds.

Oil prices have moved higher over the past week, with Brent crude oil lifting over $66.5 a barrel before stalling today. Tailwinds have been provided by rising Chinese imports and growing belief that OPEC will carry on making supply cuts.

Economic data*

Share

Closing Values at 18/2/19

Year high

Year low

FTSE 100

7,219

7,904

6,537

FTSEurofirst

1,455

1,588

1,291

DAX

11,299

13,597

10,279

DJ Industrial Average

25,883

26,952

21,713

S&P 500

2,776

2,931

2,351

NASDAQ

7,472

8,133

6,190

Hang Seng

28,228

33,484

24,541

UK Gifts

% Yield

Price

10 Year

1.17

102.74

2 Year

0.73

101.80

5 Year

0.82

99.10

30 Year

1.68

92.62

FOREX versus US Dollar

Last

% Change**

British Pound

1.29

-0.03

Euro

1.13

-0.05

Japanese Yen

110.60

0.16

Canadian Dollar

1.32

0.14

Commodities

Price (USD)

Change**

% Change**

Brent Crude Oil

66.50

-0.24

-0.36

Light Crude

55.59

0.4

0.72

Gold LBMA

1,326.15

2.94

0.22

* Source: Thomson Reuters

** From previous day close

Stock focus

Profits at HSBC missed analysts’ expectations this morning, despite rising almost 16% in 2018. The bank’s shares are down over 4% this morning amid concern that it has been hit by slower growth in China and the nation’s trade dispute with America. HSBC makes a majority of its profit in Asia.

BHP Group reported a fall in first-half profit this morning, as a series of output disruptions coincided with a decline in copper prices. Outages in its Australian and Chilean operations contributed to an 8% fall in underlying profit in the last six months of 2018, to $4.03bn.

Greggs has upgraded its profit expectations for the third time in as many months, saying it had made an “exceptionally strong start to 2019” and crediting its new vegan sausage rolls for part of the 9.6% rise in sales that it has enjoyed this year so far. The vegan roll was launched in tandem with ‘Veganuary’, a wider movement that encourages a plant-based diet in January.

Honda has revealed that it will close its car factory in Swindon within two years, putting 13,500 jobs under threat. The Japanese auto giant blamed a need to focus on electric cars and other high-volume manufacturing locations for the move and said the decision was unrelated to Brexit.

Reckitt Benckiser has said that a break-up of the company would not happen before mid-2020, when a strategic restructuring plan is due to be complete. The ongoing shake-up intends to produce two separate business units, but whether a full split occurs will depend on the “opportunities to maximise shareholder value”, Reckitt’s chairman said.

Intercontinental Hotels reported a better-than-expected rise in operating profit of 8% during the 2018 calendar year. Revenue per available room rose by 2.5% during the period, which the chief executive dubbed “excellent progress”.

Flybmi ceased to operate over the weekend, cancelling all of its flights and filing for administration. It cited rises in fuel costs, as other recently-troubled airlines have, but also increased carbon costs due to the EU’s decision to exclude the UK from full participation in its Emissions Trading Scheme. Flybmi operated 17 planes within Europe.

Important information

This publication is intended to be Walker Crips Investment Management’s own commentary on markets. It is not investment research and should not be construed as an offer or solicitation to buy, sell or trade in any of the investments, sectors or asset classes mentioned. The value of any investment and the income arising from it is not guaranteed and can fall as well as rise, so that you may not get back the amount you originally invested. Past performance is not a reliable indicator of future results. Movements in exchange rates can have an adverse effect on the value, price or income of any non-sterling denominated investment. Nothing in this document constitutes advice to undertake a
transaction, and if you require professional advice you should contact your financial adviser or your usual contact at Walker Crips.

Walker Crips Investment Management Limited is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange. Registered office: Old Change House, 128 Queen Victoria Street, London, EC4V 4BJ. Registered in England number 4774117.

Important note

No news or research content is a recommendation to deal. It is important to remember that the value of investments and the income from them can go down as well as up, so you could get back less than you invest. If you have any doubts about the suitability of any investment for your circumstances, you should contact your financial advisor.

More News

Walker Crips Investment Management Limited (WCIM) is a member of the London Stock Exchange and is
Authorised and Regulated by the Financial Conduct Authority (FCA).

This website is solely for information and private circulation and does not constitute
an offer to buy or sell shares in any company mentioned herein. References to Walker Crips
refer to Walker Crips Investment Management Limited and/or other companies within Walker Crips Group
plc. It is important to remember that the value of investments and the income from them can
go down as well as up and investors may not realise the value of the initial investment.
Recommendations may or may not be suitable for all recipients of this publication and if
you have any doubts you should seek advice from your investment advisor. WCIM cannot accept
responsibility for any losses which may be incurred by anyone acting on such recommendations.
The value in sterling terms of foreign investments may rise or fall in response to currency
fluctuations.

It must be noted that information concerning past performance is not a guide to future
performance. In line with the FCA rules on conflicts of interest, investors should be aware
that Walker Crips may have actual or potential conflicts of interest that could affect the
objectivity and independence of their research. Where such conflicts exist it is Walker Crips’
policy to disclose them publicly. Principals and Associates of WCIM may have held a long term
position in some of the stocks or shares mentioned herein. Consequently, in line with FCA Rules
on conflicts of interest, WCIM research in these areas cannot be classified as impartial
within the FCA’s definition and should not be relied upon as independent or objective.
Prices and factual details are deemed to be correct at the time of publication but may change
subsequently. The publication has been prepared with all reasonable care and is not knowingly
misleading in whole or in part. Expressions of opinion are subject to change without notice.

Investors are strongly advised to consult with their own Broker / Account Executive to discuss
risk levels and whether a particular investment is suitable for their financial circumstances.

Opinions expressed by individuals within this website does not necessarily represent the
views of the Company.

Please indicate that you agree with the statement below to continue

I have read and understand the disclaimer. I understand that the following information is not an investment recommendation. I have read and agree to the terms and conditions for the use of this site.

Investors should be aware that past performance is not a reliable indicator of future results and that the price of shares and other investments, may fall as well as rise and the amount realised may be less than the original sum invested.

Walker Crips Group plc (Old Change House, 128 Queen Victoria Street, London EC4V 4BJ), registered in England, registered number 1432059, incorporates the following companies which are authorised and regulated by the Financial Conduct Authority: Walker Crips Investment Management Limited registered in England number 4774117 member of the London Stock Exchange, Walker Crips Wealth Management Limited registered in England number 3790291, Ebor Trustees Limited registered in England number 3514268, Barker Poland Asset Management LLP registered in England and Wales number OC341149.